Slow business has clients ditching reps

Just hours after his first big studio vehicle, “Speed Racer,” sputtered at the box office on its opening weekend, Emile Hirsch dropped his UTA agent Shani Rosenzweig.

The move sent shockwaves through agencies all over town, to say the least. After all, it was hard to fault a decision to vault a young indie actor into a branded tentpole steered by “The Matrix” team of Larry and Andy Wachowski and producer Joel Silver.

The abrupt departure is the latest in a flurry of agency-hopping taking place across the industry. But unlike past movement in the tenpercentery world, these can’t be written off as routine churn. This time, it’s becoming apparent that the defections are the fallout from the fact that agencies are fighting over a shrinking pie.

Studios, with slates mostly full through 2010, refuse to hire talent for new production starts until a SAG deal is in place — leaving talent and their reps competing for the few jobs that are out there. The alternative is work cheap in indies or take the summer off.

On the TV side, the writers strike destroyed pilot season and resulted in many overall deals being canceled. It’s become so hard to make deals that one top agent says taking a straight commission has become more a profitable option than chasing a packaging fee.

“The unforeseen ripple-effect of the writers strike and the de facto actors strike is that studios have taken back all the leverage that once belonged to stars and their agents,” says one top agent who has moved to the production ranks. “Studios are rolling back and almost everybody is taking pay cuts. That has put a lot of pressure on artists, and that extends down to their representatives. It’s a scary time for all of them.”

The bottom line is, unless you’re the agent making the “Iron Man” sequel deal for Robert Downey Jr., you probably will tell clients that if they want work, it will be for less than their usual rates.

In a decidedly down market, talent defections seem to be the only thing that are up.

Hirsch, who many suspect will go to CAA, joins a long roster of high-profile talent who’ve changed rep addresses in the last few months. The list includes gross players Vince Vaughn (UTA to CAA), Ben Stiller and Jack Black (UTA to Endeavor), Robert De Niro (CAA to Endeavor), Jackie Chan (CAA to WMA), Paul Thomas Anderson (Endeavor to WMA), midlevel thesps Ashton Kutcher (Endeavor to CAA), Kate Bosworth (UTA to CAA), Topher Grace (WMA to Endeavor), and big-ticket writers Peter Morgan (ICM to UTA), Ehren Kruger (Paradigm to UTA), Jeff Nathanson (UTA to CAA), Cormac and Marianne Wibberley (UTA to WMA), Steve Pink (WMA to Endeavor), Ed Solomon (WMA to CAA) and Michael Goldenberg (CAA to UTA). Longtime ICM client Barbra Streisand capped the flurry by jumping to Endeavor last week to restart her acting and directing careers.

Past realignments of agency clients were motivated by structural shifts in the agency business: the formation of Endeavor, the merging of Triad into William Morris, and the cobbling of Bauer Benedek and Leading Artists into UTA.

This shift, many fear, is different. All agencies are bleeding because of the writers strike and the possibility of another by actors. Another prolonged commission shutdown will crush the major agencies, and likely extinguish some boutique agencies that are barely hanging on.

Even CAA is feeling the strain. After an aggressive expansion campaign that included new headquarters in Century City, a sports deal-making division and big salaries for agents that put it into the comedy game, some feel CAA is feeling the strains of that quick growth. There is a continued slow exodus of high-salaried senior agents. The latest was Tory Metzger, who exits in a month to run the film division of financier/producer Media Rights Capital.

Endeavor comes through the recent shuffle with a bolstered talent roster, most recently adding Stiller, Black, Jason Segel and other comic talent that arrived with exiting UTA agents Nick Stevens, Sharon Sheinwold and Lisa Hallerman. The challenge facing Ari Emanuel and his cohorts is to manage the increased costs and make sure the swelling partner ranks get along.

After Stevens left, UTA restructured its film department and gave greater leadership roles to Tracey Jacobs, Jim Berkus and David Kramer. While insiders say the new management structure has dramatically improved morale, the agency has to prove it can stanch the loss of clients, and the Hirsch exit didn’t help.

WMA, which began the construction of new headquarters that should be ready by 2010, has been relatively low profile since adding Ed Limato and star clients Denzel Washington, Mel Gibson, Steve Martin and Richard Gere. WMA also has added “There Will Be Blood” helmer Anderson, “Men in Black” helmer Barry Sonnenfeld and Chan.

ICM, which lost most of its remaining gross-player actors when Limato exited, is still defining itself under the leadership of Chris Silbermann. The agency has quietly bolstered its strong list of writers and directors by recently adding scribes Ron Bass, Chris Kyle (“Alexander”), and John Glenn (“Eagle Eye”). Paradigm is on an expansion kick, while stalwart boutiques like Gersh are weathering the storm.

“The movement is the result of a weird year we’ve all been going through,” David Gersh says. “Some talent doesn’t quite grasp the magnitude of what has taken place. Their frustration is high, but they don’t comprehend the impact of one strike and another de facto strike and what that has done to the industry. Some agents have more time on their hands to prey on these frustrations.”

He adds that with agencies turning to creating independent financing entities for projects, “When some of those deals go south, people get frustrated.

“Studios and specialty labels are now making films for budgets and saying, ‘This is what we have to spend for this role,’ instead of saying, ‘Let’s go hire X actress.’ This business has always been about who has the leverage, but I think it will begin to settle down again, hopefully by the fall.”

That would mean a dead summer and more client restlessness, as bookings in studio films grind to a halt. Amid fears of an actor walkout, only a handful of studio projects have production schedules that extend beyond June 30, among them “Transformers 2,” “Terminator: Salvation” and the Eddie Murphy starrer “A Thousand Words.” Only “Nottingham,” to be directed by Ridley Scott; Roland Emmerich’s “2012”; and “Angels & Demons,” to be helmed by Ron Howard, are planning late summer starts, pending a new SAG deal.

Indie financing is trickier and less lucrative, and agencies have turned to tapping into production financing for client projects. But that carries its own set of headaches, as SAG tries to reinstate its franchise agreements with tenpercenteries that would limit the types of financing deals that can be done.

It’s also hard not to notice that the down market isn’t exactly fostering a new spirit of agent fraternity amid hardship. Hirsch very notably didn’t fire his manager or lawyer — begging the question as to whether rival agents planted ideas in his head to jump ship. Lawyers and managers don’t openly raid clients.

“You hear stories about agents in the ’70s who’d call a rival and tell him he’d met with his unhappy client, and give him a chance to fix it,” says one agent turned production exec. “Could you even imagine a scenario where Ari Emanuel calls Richard Lovett and tells him Tom Cruise had come into his office saying he was unhappy? The no-holds-barred ruthlessness is a big reason why people like myself jumped to the other side. You have a chance for longevity, and a refuge from that pressure.”

Some veteran dealmakers note that agents have been spoiled and overpaid for a long time as talent was king — so a leveling of the playing field was destined to happen. And in a global recession, dealmakers say they face no more hardship than other well-paid
service fields like investment bankers and attorneys.

One dealmaker added that while Hollywood historically had two major agencies, five now call themselves majors, with each chasing the same revenue streams.

That wasn’t a problem in past years, and agents point to a time that made the commissioning game a great gig, coinciding with global and homevideo revenue growth for studios.

When an unproven Bruce Willis got $5 million for “Die Hard,” every superstar adopted that quote. Or when $5 million against 10% of the gross became the acceptable salary for top directors, agents for 15 helmers simply used it as their deal template. And when Jim Carrey got $20 million for “Cable Guy,” every superstar got a raise. Moreover, newcomers like Colin Farrell could get seven-figure paychecks before proving their worth at the box office.

Series creators and showrunners received multimillion-dollar multiyear pacts, bringing their agencies along for the ride with packaging fees.

There were no hard times back then that compare to now. The pendulum has now clearly swung the other way.

“The rules have changed, so of course some of the fun is going to go away,” one vet says.

Many of the TV deals lost during the strike won’t return, and the recent subpar box office on films featuring first-dollar gross stars like Nicole Kidman, George Clooney, Brad Pitt, Tom Cruise, Will Ferrell and Carrey has studios trying to trim gross deals. The results of “Speed Racer” certainly won’t help the availability of final-cut director deals.

And while big money is still available — Endeavor just guided “Family Guy” creator Seth MacFarlane to a huge pact — killer agency deals are few and far between. That has placed extra pressure on agents who want to be creative, but know that rivals are calling their clients to say they could have done better.

“What an agent really wants is for the deal they make to be absolutely defensible with respect to the attacks that will come from other agents,” says Michael Wimer, a longtime CAA agent who left to partner with client Roland Emmerich. “The most insecure clients, and the ones who’ve had a bad run of movies, are always the easiest prey.”

That puts agents in the position of delivering sobering news to their clients.

“You might say, ‘I think you’re worth 50% of first-dollar gross, but the reality is this movie won’t get made if we don’t embrace the economics of this deal,’ ” Wimer adds. “Do we bet on ourselves and be rewarded in success, or let the movie go away? You have to be confident, but you know that if you make a bad deal, you’ll have to worry about that client leaving.”

Some agents believe that a larger number of bigger stars will turn to independently financed films that will receive SAG waivers. The big stars will work for less money upfront, but the mid- and lower- tier talent will get paid close to their usual salaries. The hope is that the studios will be back in the game, in a big way, by January.

Is there a silver lining to the crunch?

Perhaps. But it may mean going back to the basics instead of scoring easy money. Some feel that the rapid expansion of agencies into different revenue streams puts so much pressure on the bottom line that it’s easy to forget the primary mission: to serve the interests of clients, not the agency.

“You see so many young agents who lack the historical perspective to know good art, or the understanding that you haunt comedy clubs in the middle of nowhere to find the next comic, or go to obscure play readings to find new voices and actors,” says one former dealmaker. “Ed Limato, Kevin Huvane and Bryan Lourd did those things, but the industry didn’t run at as fast a pace as now. It has turned into a money business, rather than a career business.

“It would be nice if the business got back to building artist careers.”

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